Question
Division X makes a part with the following characteristics: Production capacity 34,000 units Selling price to outside customers $ 36 Variable cost per unit $
Division X makes a part with the following characteristics:
Production capacity | 34,000 | units | |
Selling price to outside customers | $ | 36 | |
Variable cost per unit | $ | 29 | |
Fixed cost, total | $ | 109,000 | |
Division Y of the same company would like to purchase 10,090 units each period from Division X. Division Y now purchases the part from an outside supplier at a price of $35 each. Suppose Division X has ample excess capacity to handle all of Division Y's needs without any increase in fixed costs and without cutting into sales to outside customers. If Division X refuses to accept the $35 price internally and Division Y continues to buy from the outside supplier, the company as a whole will be:
worse off by $70,630 each period. better off by $10,090 each period. better off by $60,540 each period. worse off by $60,540 each period. worse off by $20,180 each periodStep by Step Solution
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